How to Invest In Property With Less Pressure But More Certainty

At the start of the coronavirus pandemic, economists issued a dire prediction for Australia’s housing market. Yet despite mass job losses, widespread lockdowns, the shuttering of the economy and a resulting recession, and the disruption of trade,  median housing values across Australia have surged 15.8 per cent over the first eight months of 2021, and are 18.4 per cent up over the past year.

With the soaring housing market and the ultra-low interest rates, many investors have turned to property in the chase for more competitive returns. But surging price requires more capital, and shortage of supply means less investment options.

Imagine an investor invest big portion of his/her fortune in a property that may not be the best option in the market because of the limited access to the resources, the investor may experience pressure due to the concentration risk, demanding of investment management (capitalize or rental management) and uncertainty of future market.

Are there any better options to invest in property?

Yes. A property fund could be a better option for investor to earn competitive returns on property but with relief of responsibility of direct ownership.

When participating in a property Fund, the capital the investors invest is combined with other Investors’ contributions. The structure allows investors to invest less capital and receive the benefits from a large-scale property investment that they couldn’t normally undertake individually due to the large amount of capital required. Then the fund, managed by a professional fund manager like Wharton, will invest property assets with the aim of delivering competitive returns for the fund’s investors.

What are the advantages of investing in a property fund instead of direct investing in a property?

1.   Less Capital Investment

By pooling money with hundreds of investors in a property fund, an investor can often gain access to different property sectors without the significant upfront capital that would have been required had the investor purchased the property or properties on his/her own. Let’s take an example, according to The Urban Developer’s latest Sydney housing market insights (September), the average house in Sydney is now selling for $1.29 million, an investor is required to pay upfront around $350,000 and bear the ongoing commitment to pay interest. By comparison, the minimum investment for a property fund is $100,000 at Wharton.

2.   Diversification

An investor may only be capable to invest in one or two single properties with same property type. Many property funds have several properties within their portfolio, like Wharton, the portfolio includes residential and commercial, preferred equity and debt. This allows for a critical level of diversification that investors may not have been able to achieve on their own. In addition, investors can make the allocation to different types of property funds according to their expectations. At Wharton, investors can allocate their investments in the fixed return property funds featuring monthly distribution and equity property funds to gain the greatest potential at the same time, further diversify the portfolio.

3.   High certainty for capital growth

Investors in a property fund may also receive a capital gain as developers but with less contribution. The managers of property funds are experts in property industry, they have much deep understandings of the market and more insights, more resources to access and greater bargain power to negotiate with the suppliers or builders, which all contribute to the higher margin in the investment.

4.   Stable income

Some property funds are designed to provide investors with regular distribution income from the property during the life of a fund. The distribution rate is indicated in advance (not guarantee) and it is distributed monthly, quarterly or yearly. Investors can receive the higher return if they re-invest the distribution. The regular distribution would provide much more comfort to investors.

5.   Professional management

Property funds are managed by professional fund managers, which leverages their expertise in investment and property to source and acquire properties that meet the funds’ investment and risk management criteria. Like Wharton, it is proudly established by a team of financial professionals with more than 20 years’ experience in property investment and fund management. Leveraging on extensive in-house property development and property management capabilities, Wharton has deep understandings and rare insights into Australia’s property market, which enable Wharton to conduct rigorous due diligence with detailed analyses on each project. After a property is acquired, all components of managing the investment, such as maintenance, administration, rent and unexpected expenses, are also professionally managed by Wharton.

6.   Liquidity

Unlike direct investment in property, property funds may provide liquidity to investors depending on the funds’ cash position, or sometimes investors can transfer their fund units to other investors which fund managers can provide assistance. In other circumstance, fund mangers may offer different unit classes featuring different investment term, investors can take their cash-at-call requirement into consideration and choose the appropriate investment term. 

Now do you want to learn more about attractiveness of property funds?

It is time to talk to us to know your suitable property investment solutions. Since inception, Wharton has invested in 18 projects with project value of $718 million and delivered average annual return of 10% to our investors. Please contact us info@whartoncapital.com.au to initial your property investment.